Structural Divergence of Copper and Palladium Under Global Energy Transition

Abstract

This study presents a fundamental analysis of the structural divergence between the copper (Cu) and palladium (Pd) markets in the context of the global energy transition and provides a rationale for a long-term asymmetric spread strategy: Long Copper / Short 0.5x Palladium. Drawing on a synthesis of data from more than 80 academic and industry sources, it shows the two metals on opposing demand trajectories — copper facing a structural supply deficit amid four simultaneous demand vectors (transport electrification, AI infrastructure, grid modernization, defense), while palladium confronts demand destruction from the substitution of internal combustion engines. Stress-testing across five scenarios confirms a positive expected value and pronounced positive skewness, with tail risk on the palladium leg constrained by the 0.5x coefficient.

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